Note 11 - Debt
|12 Months Ended|
Jun. 30, 2021
|Notes to Financial Statements|
|Debt Disclosure [Text Block]||
Total debt obligations consist of the following (in thousands):
On December 21, 2018, the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement provides for a $165 million revolving credit facility (the “Facility”), subject to borrowing base availability, with the maturity date of December 21, 2023. We incurred financing costs of $0.6 million in fiscal 2019, which are being amortized as interest expense over the remaining life of the Facility using the effective interest method.
At the Company’s option, revolving loans under the Facility bear interest, based on the average availability, at an annual rate of either (a) the London Interbank Offered rate (“LIBOR”) plus 1.5% to 2.0%, or (b) the higher of (i) the prime rate, (ii) the federal funds effective rate plus 0.5%, or (iii) LIBOR plus 1.0% plus in each case 0.5% to 1.0%.
The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Facility, including the amount of collateral available, a borrowing base formula based upon numerous factors, including the value of eligible inventory and accounts receivable, and other restrictions contained in the Facility. All obligations under the Facility are secured by assets of the Loan Parties, including inventory, receivables and certain types of intellectual property.
Borrowings under the Facility
We borrowed $100.0 million under the Facility in March 2020 and repaid $50.0 million in June 2020, leaving $50.0 million of outstanding borrowings on our balance sheet as of June 30, 2020. We subsequently repaid the remaining $50.0 million in the first quarter of fiscal 2021 using available cash on hand. The borrowings had a weighted average interest rate equal to the one-month LIBOR rate plus a spread using a debt leverage pricing grid. The outstanding borrowings of $50 million as of June 30, 2020 were reported as Long-term debt within the consolidated balance sheet. For the twelve months ended June 30, 2021 and 2020, we recorded interest expense of $0.3 million and $0.5 million, respectively, on our borrowings.
We believe the fair value of debt approximates the carrying amount as the terms and interest rate approximate market rates given its floating interest rate basis.
Covenants and Other Ratios
The Facility contains various restrictive and affirmative covenants, including required financial reporting, limitations on the ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate with or into another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of this type and size. Loans under the Facility may become immediately due and payable upon certain events of default (including failure to comply with covenants, change of control or cross-defaults) as set forth in the Facility.
The Facility does not contain any significant financial ratio covenants or coverage ratio covenants other than a fixed charge coverage ratio covenant based on the ratio of (a) EBITDA, plus cash Rentals, minus Unfinanced Capital Expenditures to (b) Fixed Charges, as such terms are defined in the Facility (the “FCCR Covenant”). The FCCR Covenant only applies in certain limited circumstances, including when the unused availability under the Facility falls below $18.5 million. The FCCR Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis. At no point during fiscal years 2021 or 2020, did the unused availability under the Facility fall below $18.5 million, thus the FCCR Covenant did not apply.
At June 30, 2021 and 2020, there was $5.0 million and $5.8 million, respectively, of standby letters of credit outstanding under the Facility. Total borrowing base availability under the Facility was $75.7 million at June 30, 2021 and $58.9 million at June 30, 2020. At both June 30, 2021 and 2020, we were in compliance with all the covenants under the Facility.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef